Fed’s Plosser, Bullard Optimistic on Economic Prospects

Two regional Federal Reserve bank presidents in separate interviews expressed optimism about the economy’s prospects even amid noisy data due to weather.

Federal Reserve Bank of Philadelphia President Charles Plosser said Friday on Bloomberg TV despite “very noisy” data due to weather and winter factors, he remains optimistic about the “longer-term growth” prospects of the U.S. economy noting it’s in a firmer position than it’s been for some years.

Mr. Plosser urged “patience” with the U.S. data, however, saying we might not get a handle on the underlying economy for a couple months, and suggesting perhaps that at the March meeting Fed policymakers may have their hands tied because they won’t know what the economic indicators are showing.

Mr. Plosser repeated his forecast that he is still looking for “close to 3% growth” in the U.S. economy in 2014.

Asked about the Fed’s unemployment and inflation mandates, he said “both” are equally important but that the 6.5% unemployment threshold is “obsolete” and now we need to figure out how to go forward from here.

Federal Reserve Bank of St. Louis President James Bullard said it’s difficult to disentangle the impact of weather on recent weakness in the economy but he’s “still optimistic” about U.S. economic growth in 2014 even if fourth-quarter GDP is revised down to 2.4% later Friday and we get the first quarter in the 2% range.

“I think I would still project that 2014 would have stronger GDP growth than 2013 did, and I would still project inflation would come back to target,” he said in comments on CNBC.

“I don’t thing this spate of soft data, the way I’m thinking about it right now, is going to be enough for me to revise my forecasts,” he said.

Asked about timing of a possible Fed interest rate rise, Mr. Bullard said as of December he was one of two members on the Federal Open Market Committee predicting a rise in 2014, but he may have to revisit that in March based on the economy.

“I think I’m going to have to revisit that and see if I want to keep it in 2014,” he said.

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